Wipro to buy Canada's ATCO I-Tek for $195 mn

Deal includes a $1.12-billion pact under which Wipro would provide outsourcing solutions to ATCO group till December 2024

Wipro, India’s third-largest information technology (IT) services company, said on Friday it had entered into a two-way pact with Canada’s ATCO group, according to which it would acquire the Alberta-based company’s subsidiary ATCO I-Tek for $195 million (about Rs 1,176 crore) in cash, and also would provide total outsourcing solutions to the group for 10 years.

Wipro will also provide complete suite of IT services to the ATCO group in Canada and Australia. The Bangalore-based company expects to garner revenues of $112 million (about Rs 676 crore) from the contract each year till December 2024, which pegs the overall contract size at $1.12 billion (about Rs 6,760 crore). Revenues from the deal are likely to start reflecting from July-September 2015 onwards.

“This is one of the largest contracts we have won,” said Anand Padmanabhan, chief executive - energy, natural resources and utilities, at Wipro. “We have signed a set of agreements with the ATCO group, and we would be providing total outsourcing services, which will include managing the infrastructure, application maintenance, development and also asset management.”

The contract is subject to customary closing conditions, Wipro said in a release.

Toronto Stock Exchange-listed ATCO has operations across structures and logistics, utilities, energy and technologies. The company has 9,800 employees and assets of approximately $16 billion.

With the acquisition, Wipro will absorb ATCO I-Tek’s 500 employees. ATCO I-Tek has been providing IT services to ATCO group for the past 15 years and has presence in North America and Australia. Wipro expects that the acquisition would strengthen its delivery model in the two regions. “Canada and Australia are geographies that are very critical and need local presence and capabilities. We would have the ability to serve all the existing customers of the company, and also new customers in those geographies,” said Padmanabhan.

“The whole logic of taking over ATCO I-Tek is to enhance our local presence and capability to provide services across the spectrum in these markets,” he added.

Wipro will fund the acquisition through its cash-in-hand, which was close to $2 billion at the end of FY14. “We have sufficient liquidity on our balance sheet, so to that extent, we don’t foresee funding as a problem at all,” said Jatin Dalal, Wipro’s chief financial officer for IT business.

This is the company’s second acquisition in the energy and utilities space after its buyout of US-based SAIC’s oil and gas IT services business for about $150 million in April 2011.

Energy, Natural Resources and Utilities is one of the fastest growing strategic business units of Wipro, accounting for 16 per cent of the company’s overall revenues.